TY - JOUR
T1 - CoVaR
AU - Adrian, Tobias
AU - Brunnermeier, Markus K.
N1 - Funding Information:
We thank Xiaoyang Dong, Evan Friedman, Daniel Green, Sam Langfield, Hoai-Luu Nguyen, Daniel Stackman, and Christian Wolf for outstanding research assistance. The authors also thank Paolo Angelini, Gadi Barlevy, Rene Carmona, Stephen Brown, Robert Engle, Mark Flannery, Xavier Gabaix, Paul Glasserman, Beverly Hirtle, Jon Danielson, John Kambhu, Arvind Krishnamurthy, Burton Malkiel, Ulrich Muller, Maureen O'Hara, Andrew Patton, Matt Pritsker, Matt Richardson, Jean-Charles Rochet, Jose Scheinkman, Jeremy Stein, Kevin Stiroh, Rene Stulz, and Skander Van den Heuvel for feedback, as well as participants at numerous conferences as well as university and central bank seminars. We are grateful for support from the Institute for Quantitative Investment Research Europe. Brunnermeier acknowledges financial support from the Alfred P. Sloan Foundation. The paper first appeared as Federal Reserve Bank of New York Staff Report 348 on September 5, 2008. The views expressed in this paper are those of the authors and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System
PY - 2016/7
Y1 - 2016/7
N2 - We propose a measure of systemic risk, Δ CoVaR, defined as the change in the value at risk of the financial system conditional on an institution being under distress relative to its median state. Our estimates show that characteristics such as leverage, size, maturity mismatch, and asset price booms significantly predict Δ CoVaR. We also provide out-of-sample forecasts of a countercyclical, forwardlooking measure of systemic risk, and show that the 2006:IV value of this measure would have predicted more than one-third of realized Δ CoVaR during the 2007-2009 financial crisis.
AB - We propose a measure of systemic risk, Δ CoVaR, defined as the change in the value at risk of the financial system conditional on an institution being under distress relative to its median state. Our estimates show that characteristics such as leverage, size, maturity mismatch, and asset price booms significantly predict Δ CoVaR. We also provide out-of-sample forecasts of a countercyclical, forwardlooking measure of systemic risk, and show that the 2006:IV value of this measure would have predicted more than one-third of realized Δ CoVaR during the 2007-2009 financial crisis.
UR - http://www.scopus.com/inward/record.url?scp=84978880727&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84978880727&partnerID=8YFLogxK
U2 - 10.1257/aer.20120555
DO - 10.1257/aer.20120555
M3 - Article
AN - SCOPUS:84978880727
SN - 0002-8282
VL - 106
SP - 1705
EP - 1741
JO - American Economic Review
JF - American Economic Review
IS - 7
ER -